[Maria Brown]
Hi, this is Maria Brown with Palmas Dream Homes. Today, I am with attorney Jennifer O’Dell. She helps us with the closings. Hi, Jennifer.
[Jennifer O’Dell]
Hi Maria. Thank you for having us. I’m glad to be here.
[Maria Brown]
Thank you. I have some questions for you so you can help our clients regarding how to close a Puerto Rico. What do you do before, during, and after the closing?
[Jennifer O’Dell]
Yes, of course. Closings in Puerto Rico are very different from those in the United States. Here, the notary is an attorney who helps with the whole transaction, not representing one party and then the other but all parties in the transaction.
So what we do is once the realtor already has the agreement and the parties with the price and the parties. The case is referred to the attorney, and the attorney’s first thing to do is get a title study of the property to verify the legal status of the property. A title study is a document prepared by a title company reviewing the records of the registry of property and basically to verify who is the owner of the property, if there are any liens on the property, if there’s a mortgage on the property, or if there are any issues such as an inheritance on the property. We also check property taxes in Puerto Rico to ensure that the property is in the name of the seller and the owner and to see if there are any debts on the property or undue exoneration.
Once we have the title study, then what I do is I communicate with the parties, and then if there’s any lien or issue that we need to work with and cancel, we work with that also, but then assuming that everything is looking good then we communicate with the buyer and the seller. We start preparing the purchase sale deed. The purchase sale deed is a document that will be signed at the closing, which we do here, which is also different from the U.S. We do it in person. We all sit together at a table, a celebratory activity where we’re all together, and the buyer buys, the seller sells, and that’s when the title is transferred. After the closing, we sign the purchase sale deed either in person or through a POA, and then after the closing, I usually do three things.
I file the deed at the property registry, I’ll file the change of owner in CRIM, and I will file the Planilla form at the treasury department. I need to clarify that it’s in cash sales. If a bank is involved, I will execute the purchase sale deed and the bank attorney will file the change of owner for CREAM and the purchase sale deed at the property registry.
[Maria Brown]
What happens when you have a property that has been an inheritance, and it was a marriage that owned a property, and they have children who are also inheriting the property? What’s the procedure, and then how’s the split?
[Jennifer O’Dell]
Okay, well, it’s very important that when one of the spouses passes away, the whole probate procedure is done before the closing because, in Puerto Rico, it’s a lengthy process that takes a few months and needs to be done before the closing. The probate has three steps. First of all, we need to see if there is a will or not.
If there is no will, we have to follow the procedure in court to obtain the resolution of the declaration of heirs. Then, we need to obtain the death certificate of the deceased person, a marriage certificate if they’re married, and the birth certificate of the offspring. OOnce we obtain the resolution of the declaration of heirs, the parties need to file a form at the treasury department to obtain a release from the treasury department.
Once the release is obtained from a treasury department, they need to file a petition at the property register to record the property in the name of the heirs. Those three steps must be completed before the property can be sold. In Puerto Rico, if there is no will and the spouses own the property together as part of a conjugal property, we first split the property. Hence, there’s a liquidation of conjugal property, so 50% will go to the living spouse, and then the other 50% will be divided between the widower and the offspring, and that’s a change in the civil code of Puerto Rico of 2020 because before it was different but now the widower inherits together with the offspring of the couple. If there are minor children, a judicial procedure is to be performed to obtain authorization to sell a property. In Puerto Rico, different than in the United States, minor children are minors until they’re 21 age.
[Maria Brown]
Can you explain a little bit about the process of preparing a prenup or postnup when you own a property and want to buy or sell it?
[Jennifer O’Dell]
Yes, that’s also one of the recent changes in the Puerto Rico law system. You needed to do a prenuptial agreement before you got married. Recently, a new law was passed where now you can modify your prenup or create a postnup, so now you can change the regime of your marriage during the marriage; for example, a person can privately own property if it was obtained through inheritance or purchased before the the couple was married or purchased after the couple was married but with an optional agreement being a prenup or a postnup.
[Maria Brown]
What happens when a person wants to buy or sell a property in Puerto Rico but can’t physically be there? How do you work with a power of attorney for those who want to buy or sell?
[Jennifer O’Dell]
Well, that’s what we work with all the time now because people travel so much, so it’s okay. We do it all the time. First, we will see if the person buying or selling the property is in Puerto Rico; in that case, we can do the POA here. One important thing is that POAs here are done through public deeds that need to be prepared, signed by the person, and filed at the registry of powers of attorney.
So, if the person is in Puerto Rico, we do the POA here in Puerto Rico and file it at the registry of powers of attorney. The person doing the POA needs to designate someone else who will be physically in Puerto Rico at the closing. If the person executing the POA is not in Puerto Rico, for example, if they’re in the U.S. or another country, then we prepare the POA and send it to that person by email. Then, that person needs to notarize it in the United States or another country and get a validation of the notary signature, which they send to us. We do a deed of protocolization of power of attorney and file it at the registry of powers of attorney. It’s a little bit different than the process in the U.S., but it can be done.
[Maria Brown]
What is the difference when you’re doing a closing that is a cash purchase versus something that is financed?
[Jennifer O’Dell]
When the closing is financed, two deeds will be signed at the closing of the purchase sale deed. Then, the bank will have an attorney execute the mortgage deed. When the transaction is financed, the bank is the one regulating most of the aspects of the transaction, for they need to approve the loan to the borrower. Then, they are also the ones who actually prepare the settlement statements and do the disbursements. However, the parties still get to choose who the attorney notary preparing the purchase sale deed. Then, the other attorney will prepare the mortgage deed. In that case, my role is more limited. I prepare, get the title study from the bank, prepare the purchase sale deed, and then execute it at the closing.
If the transaction is cash, it’s different because we’re more involved in the whole transaction and work mostly as a team. First of all the first part of the team is the real estate agent who puts together the buyer and the seller and and obtains all the main agreements as to the price the property and all that and then the second part of the team is me I get the title study I’ll do the title study to verify the legal status of the property prepare the purchase sale deed discuss it with the parties before the closing and then we all meet at the closing and then the third part of the transaction is a closing agent who prepares the title study and receives all the statements of different HOAs and CRIM and any mortgages that may be due and they before the closing a few days before the closing the closing agent sends the settlement statement to the parties the parties review it and once they approve it then the closing agent receives the wire usually or the funds from the buyer to be disbursed at closing so then we all come together at the closing which is a place where usually the realtor comes and just check that everything is okay that the notary attorney has the parties sign the purchase sale deed and the closing agent then disburses the funds at the closing.
[Maria Brown]
Well, thank you so much for your time. We hope you find this helpful.
[Jennifer O’Dell]
Thank you for having me, Maria, and looking forward to many more closings